Stocks: A 'schizophrenic' day

By Hibah YousufAugust 1, 2011: 4:57 PM ET

Click chart for more of today's market action.

NEW YORK (CNNMoney) -- Stocks took a wild ride Monday.

The day started with an early rally fueled by hopes of a resolution to the debt standoff in Washington. But a weak manufacturing report quickly deflated that optimism -- leaving stocks little changed as investors await a House vote.

The Dow Jones industrial average (INDU) ended down 11 points, or 0.1%, marking the seventh straight day of losses. But the modest decline came after the index tumbled more than 1% earlier in the session -- following a 1% jump at the start of trading.

Last Friday's second-quarter GDP report in particular servedas a stark reminder that the economy is growing at a sluggish 1.3% pace.

The gloom continued into Monday, with a report that showed that the manufacturing sector nearly stood still in July. The Institute for Supply Management's manufacturing index slid to 50.9 in July -- much worse than the level of 54 that economists were expecting, and down from 55.3 in June.

"We keep seeing data that shows the economy is getting worse," said Kim Caughey Forrest, senior equity analyst at Fort Pitt Capital Group. "Earlier this year, we thought the economy would improve -- albeit gradually. But all the negative surprises are concerning investors."

But the president cautioned that lawmakers' work was not done, with the deal expected to go for a vote Monday.

Even if the deal passes, which many investors are expecting at this point, Vernon said he doesn't think it will do much for markets. While there may be a short relief rally, the market is still facing serious longer-term headwinds.

"If I look out 18 months from now, I'm having a hard time seeing anything good for the economy -- no matter what deal is made," said Vernon, adding that investors are still concerned about high unemployment and the eurozone debt crisis.

Economy: The job market remains one of the roughest spots in the economic recovery, and investors will be bracing for the July jobs report on Friday.

The U.S. economy is expected to have created 78,000 jobs last month, according to a consensus of analysts surveyed by Briefing.com. In June, the economy added a paltry 18,000 jobs.

"We're 25 months into the recovery, and the job market is moving in the right direction but it's still abysmal," said Mark Luschini, chief investment strategist at Janney Montgomery Scott. "If the figures on Friday come below estimates, that will only compound economic concerns and lift the probability of the economy falling back into a recession."

Companies: Shares of HSBC Holdings PLC (HBC) rose 1.6%, after the London-based bank announced it will eliminate 25,000 jobs by 2013. The bank has already trimmed 5,000 jobs. The job cuts are seen as a positive, since they will help the bank reduce costs. HSBC also posted a solid profit.